GlobalFoundries To Receive $1.5B From IBM Aside From Its Chip Business

GlobalFoundries To Receive $1.5B From IBM Aside From Its Chip Business

The move of IBM baffled many industry watchers as the company is set to pay GlobalFoundries to take over its semiconductor manufacturing operations. The move is contrary to typical business practice where the company acquiring a part of another company’s business will pay for it.

The decision was made by the multinational tech company to get rid of its chipmaking operations. The handover, which includes the commercial microelectronics business, will cost $1.5 billion in cash. The payment will be made over a period of three years. It will allow the semiconductor foundry to receive cash aside from acquiring the chipmaking business of the company.

The multinational tech company revealed the reason for its decision. IBM indicated through an investor statement that its semiconductor arm was not big enough and was creating losses for the company. It added that the increasing complexity of semiconductor development will result to increasing costs for the company. The tech company indicated that the move allows it to free up capital, which that can be used in other areas.

The second quarter earnings of the company revealed that revenues for its microelectronics business have declined by 18 percent since last year.

The deal will allow GlobalFoundries to become the operator and owner of the semiconductor manufacturing plants of the tech company. The intellectual property for the business is also included in the deal. The semiconductor foundry was established in 2009 following the sale of the manufacturing operations of Advance Micro Devices to Advanced Technology Investment Co. Advanced Technology Investment Co. is owned by the government of Abu Dhabi, which is one of the emirates under the United Arab Emirates.

No statements were issued by GlobalFoundries in connection to its deal with IBM.